The high value of the rand, so damaging in many other respects, offers a rare opportunity to act against exchange controls without fear of money leaving the country too quickly, says Democratic Alliance leader Tony Leon.
Writing in his weekly newsletter on Thursday, Leon said the time has come to get rid of exchange controls. This step, unlike interest rate cuts, lies uniquely in the hands of the government.
”Many economists argue that abolishing exchange controls would help stabilise the rand’s value in the long run.
”As long as controls are in place, the exchange rate does not reflect the true market price of the rand. The currency is therefore shrouded in a mist of uncertainty, which makes it more vulnerable to speculative booms and busts,” he said.
Exchange controls should also be discarded as a matter of principle, as they are a holdover from the apartheid siege economy, and violate the right of individuals to do with their money what they wish.
”There is no reason that the [South African] Reserve Bank should be allowed to buy and sell rands but that individuals and businesses should have to ask permission to do the same.”
Exchange controls also make it more difficult for law-enforcement officials to stop criminals from laundering money, because so much money is being transferred through illegal channels by ordinary citizens who are otherwise law-abiding.
However, the main reason to abolish exchange controls would be to send a positive signal to potential investors, both local and foreign, Leon said.
”Exchange controls indicate that we lack confidence in our own economy. Getting rid of them would show that we are more confident in our financial institutions, our political system, and our economic future.
”It would boost investment, which our country desperately needs in order to increase economic growth. The government must act now,” Leon said. — Sapa